Here's what homeowners should know about rates for second mortgages

by Jennifer Johansen 09/22/2024

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For homeowners who want financing in addition to an existing loan, rates for second mortgages are high on the list of things to consider. A second mortgage allows you to borrow money against the equity you’ve built in your home.

Here is some more important information homeowners should know about this type of financing:

What is a second mortgage?

A second mortgage is a lien placed on an asset that already has an existing mortgage. For your house, the second mortgage will function like a home equity loan or home equity line of credit (HELOC).

Just like with your regular mortgage, your loan officer may take possession of your home if you default on the loan.

Second mortgages are often cheaper than cards because of their low rates. You can use your second mortgage money for virtually anything, which makes them a popular choice for handling debt consolidation, home improvements and medical expenses.

How to get a second mortgage

The first step in obtaining a second mortgage is to determine your home’s equity. It’s ideal to have at least 20% equity, so the remaining loan amount doesn’t go over 80% of the home’s total value.

It’s also a good idea to check on your credit report before applying. This gives you a chance to dispute any mistakes or resolve any issues that could affect your ability to qualify for a home equity loan or credit line.

When to apply for financing

There is no hard and fast rule for the best time to get a second mortgage. It’s important to consider every possible factor, including the current interest rate and your financial situation.

Usually, borrowers follow market trends when acquiring the second loan. Mortgage rates can vary, but tracking the trends of the market will allow you to apply and receive a second mortgage when rates are low. You also want to be aware of the various fees charged by mortgage lenders and how they factor in to the total annual percentage rate (APR).

Home equity loans through second mortgages are a great way to capitalize on your home’s equity. They can help you cover expenses unrelated to your home, either through a lump sum loan or HELOC. To find out if a second mortgage will work for you, consult a financial advisor and check with your lender for details.

Second Mortgage

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About the Author

Jennifer Johansen

Jennifer is passionate about the Real Estate business, and has been involved in related family businesses in construction, architectural millwork, and finance for 20 years. She and her husband relocated to Naples, from New York, 10 years ago, although her family has owned property on Marco Island since the 1980's. She has a Bachelor's Degree in Psychology and a Dual Master's Degree in Counseling and Education. She has acquired many necessary skills that are useful in Real Estate from being in the field of Counseling for many years. She holds the belief that building rapport is vital to helping her clients have a positive experience, while achieving their goals. She is very thorough and detail oriented, and has formed many close relationships with professionals in related fields, such as law, title insurance, home inspectors and other contractors. She aims to offer concierge- level service to her clients at every price point. When time permits, she enjoys spending time with family and friends. Having grown up on the South Shore of Long Island, and enjoying her summers on Fire Island, she loves any activity related to salt water, boating and the beach. Additional hobbies include gardening, art, and studying nutrition, wellness and naturopathy. She is knowledgeable about Naples and Marco Island Real Estate, in estate areas, golf/gated communities, and waterfront properties. She is a member of The Naples Board of Realtors and Marco Island Area Association of Realtors.